But I sometimes feel that he has a blind spot when it comes to the value of new technologies.
asserted
it → feel → technologies
In 1998 he famously wrote:
The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’—which states that the number of potential connections in a network is proportional to the square of the number of participants—becomes apparent: most people have nothing to say to each other!
asserted
people → write → other
By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.
asserted
impact → become → machine
By the time he wrote that, America was already well into an IT-driven productivity boom that would temporarily interrupt the stagnation that had begun in the 1970s.
asserted
that → write → 1970s
The internet was surely part of that story; it allowed companies to reshuffle and optimize their supply chains for greater efficiency, find customers, suppliers, and workers more easily, conduct business communications cheaply and in greater depth, and so on.
asserted
companies → allow → depth
Dolfen et al. (2023) estimate large consumer gains from the rise of e-commerce, Barrero, Bloom, and Davis (2021) find large economic gains to households from high-quality internet access, and so on.
asserted
Barrero → estimate → access
The internet is a lot more than just people yelling at each other on forums and social media.
asserted
internet → yell → forums
(Krugman later argued that the internet’s economic impact had been disappointing, but I suppose that depends on your expectations.
asserted
that → argue → expectations
In 2011, Krugman wrote that American kitchens hadn’t changed much since 1957.
asserted
kitchens → write → 1957
I can forgive him for not being an early adopter of the air fryer or the Instant Pot, which came out in 2010, but he really should have given more consideration to countertop microwaves, food processors, Keurig-type coffee machines, crock pots, and induction stoves, all of which became available between 1957 and when he wrote the post.
asserted
he → forgive → post
So although it’s always dangerous to disagree with Paul, I am going to go ahead and push back on his argument that AI technology “does nothing” for most Americans:
asserted
technology → ’ → Americans
He writes:
There is also, however, a more prosaic reasons for the public’s dislike of AI: This is a technology of, by and for oligarchs, with hardly any of the benefits trickling down to regular Americans…
asserted
any → write → Americans
Or to put it a different way, never before in history have corporations spent so much money — playing a major role in soaring interest rates — to create so few jobs.
asserted
corporations → put → jobs
I think that this is basically wrong.
asserted
this → think → ?
Although we don’t know the long-term effects of AI on the distribution of income and wealth, right now we can see a substantial amount of economic benefit flowing — I wouldn’t say “trickling down”1 — to regular Americans.
asserted
I → know → Americans
This is not to say that regular Americans couldn’t stand to benefit more from the AI boom.
asserted
Americans → say → boom
I think they could.
uncertain
they → think → ?
I like some (though not all) of Jared Bernstein’s ideas for spreading the benefits of the data center boom more broadly.
asserted
I → like → boom
But I think Krugman has underestimated the benefits of the data center buildout in terms of direct employment, and has basically ignored the fiscal, macroeconomic, and consumer benefits of the current AI boom.
asserted
Krugman → think → boom
The AI buildout is creating lots of construction jobs
Building data centers takes a lot of labor.
asserted
centers → create → labor
But Krugman argues that data centers aren’t doing much in the way of providing construction jobs:
asserted
centers → argue → jobs
Given this spending surge, one should expect a sharp rise in nonresidential construction spending — basically construction for businesses rather than housing...
asserted
one → give → housing
But that’s not what we actually see.
asserted
we → ’ → what
Nonresidential construction…has basically flatlined under Trump, despite the immense AI investment boom…[E]ven the physical construction of a data center involves relatively little construction.
asserted
construction → flatline → construction
He quotes Van Nieuwerburgh (2026), who shows that only about a third of the cost of a data center involves construction work.
asserted
third → quote → work
But I don’t think Krugman proves his case here.
asserted
Krugman → think → case
First of all, if we’re talking about construction jobs, we should look at employment levels, not spending.
asserted
we → talk → levels
And here we see an increase in construction jobs since the AI boom began in late 2022:
asserted
boom → see → 2022
Construction has also increased as a percentage of the workforce:
asserted
Construction → increase → workforce
And remember, this was at a time when Trump was deporting construction workers en masse — 13% of the construction workforce is undocumented, and deportations also have knock-on negative effects on the industry that result in the firing of native-born workers as well.
asserted
that → remember → workers
This probably explains the pause in the increase of construction employment in 2025.
asserted
This → explain → 2025
But even that couldn’t stop construction’s rise.
asserted
that → stop → rise
And it’s exactly the type of construction workers who are required for building data centers who are seeing the biggest job gains:
asserted
who → ’ → gains
Construction workers’ real wages have also risen since the middle of 2022:
asserted
wages → rise → 2022
You might be tempted to think that this is a composition effect from Trump deporting the lowest-paid construction workers in 2025.
uncertain
Trump → tempt → 2025
In fact, although estimates of the effect of the data center buildout on construction employment produce very different numbers, they all agree that it’s a significant positive impact.
asserted
it → produce → numbers
The state of Virginia, for example, produced the following numbers:
asserted
state → produce → numbers
And of course these are just the numbers so far; the data center buildout is accelerating, and Goldman estimates that 500,000 new construction and trades jobs will have to be added by 2030 in order to sustain it.
So while you can argue that this boost to labor demand isn’t worth the costs of AI (whatever you think those are), we need to count it on the positive side of the ledger here.
asserted
we → accelerate → ledger
Data centers can be a huge tax windfall for state and local governments
Jobs aren’t the only way that the economic benefits of data centers get spread to ordinary Americans.
asserted
benefits → spread → Americans
Data centers pay property taxes, sales taxes, corporate taxes, various fees, and so on — here’s a good explainer from the Tax Foundation.
asserted
explainer → pay → Foundation
…and 67 more, not listed.
The Aporia
